Ruling means freedom for Hyundai chief

Court says he's too important to S. Korean economy to be in prison

JAE-SOON CHANG, Associated Press

Published 5:30 am, Friday, September 7, 2007

SEOUL, SOUTH KOREA — An appeals court suspended a three-year prison sentence for Hyundai Motor Co. Chairman Chung Mong-koo on Thursday, saying the tycoon is too important to South Korea's economy to go to prison for embezzlement.

A three-judge panel at the Seoul High Court suspended the sentence for five years, meaning that the 69-year-old head of the nation's biggest automaker will avoid prison as long as he keeps a clean record during that period.

A lower court had sentenced Chung in February to three years for embezzling over $100 million from the company to set up a slush fund. Prosecutors say the fund was used to pay lobbyists to gain government favors and for personal use.

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Presiding Judge Lee Jae-hong told the packed courtroom that Hyundai Motor has great influence over the nation's economy and Chung, its hands-on leader, is the symbol of the company.

"I am also a citizen of the Republic of Korea," Lee said. "I was unwilling to engage in a gamble that would put the nation's economy at risk."

Chung, free on bail after spending two months in jail after his arrest in April last year, has been actively running the company, which ranks as the world's sixth-largest automaker and has ambitions to become the fifth-largest by 2010.

Lee said he struggled with the decision, originally set for July 10, and postponed it twice, saying the court needed more time. He said he sought the views of various people, including other judges, prosecutors, lawyers, journalists and "even taxi drivers and restaurant employees."

Prosecutors sought a six-year prison term, saying the original decision was not harsh enough for the crime.

The court also ordered Chung to fulfill a promise he made last year to donate $1.1 billion of his personal assets to society and told him to do community service.

It was not immediately clear whether prosecutors planned to appeal to the Supreme Court.

Analysts say Hyundai faces problems including softer sales in the U.S. and China and further mending relations with its strike-prone labor union.

A new wage deal Hyundai struck with its unionized workers this week was a positive development but "more work needs to be done to be able to wipe rocky labor-management relations off Hyundai's list of risk factors," said Chung Sung-yob, an analyst at Daiwa Securities Korea.